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Corporation Dissolution - Summary

The dissolution of a corporation is the legal termination of its existence, ceasing all business operations except for winding up affairs. There are two types of dissolution: voluntary, initiated by the corporation, and involuntary, ordered by authorities due to various reasons. The process involves settling obligations, liquidating assets, and distributing remaining assets to shareholders, with specific documentation required for completion.

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5 views3 pages

Corporation Dissolution - Summary

The dissolution of a corporation is the legal termination of its existence, ceasing all business operations except for winding up affairs. There are two types of dissolution: voluntary, initiated by the corporation, and involuntary, ordered by authorities due to various reasons. The process involves settling obligations, liquidating assets, and distributing remaining assets to shareholders, with specific documentation required for completion.

Uploaded by

zeinchoi3
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Corporation Dissolution – Summary

Definition:​
Dissolution of a corporation is the legal termination of its corporate existence. Once
dissolved, the corporation ceases business operations except for activities necessary to wind up
affairs, liquidate assets, and settle liabilities.

1. Types of Dissolution

A. Voluntary Dissolution

Initiated by the corporation itself.

1.​ When no creditors are affected​

○​ Requires approval of the majority of the board of directors​

○​ Approval of at least two-thirds (2/3) of the outstanding shares (stock corp.) or


members (non-stock corp.)​

○​ Notice to the Securities and Exchange Commission (SEC)​

○​ Publication of notice (if required)​

○​ Filing of Articles of Dissolution with the SEC​

2.​ When creditors are affected​

○​ Same approvals as above​

○​ Requires SEC supervision to protect creditors​

○​ SEC may appoint a receiver to oversee payment of debts​

B. Involuntary Dissolution

Ordered by the SEC, court, or the state due to:


●​ Expiration of corporate term (if not extended)​

●​ Non-use of corporate charter or continuous inoperation (usually ≥5 years)​

●​ Failure to file/report required documents​

●​ Violation of laws or regulations​

●​ Fraud in incorporation​

●​ By final court judgment (e.g., insolvency, illegal acts)​

2. Effects of Dissolution

●​ Corporation no longer allowed to conduct normal business​

●​ Continues to exist only for winding up for a period allowed by law (often 3 years)​

●​ Powers limited to:​

○​ Collecting receivables​

○​ Disposing of property​

○​ Settling debts​

○​ Distributing remaining assets to shareholders​

3. Winding Up Process

1.​ Cease normal operations​

2.​ Settle obligations – Pay creditors first​

3.​ Liquidate assets – Convert to cash or distribute in kind​

4.​ Distribute residual assets – To shareholders according to shareholdings​


5.​ Close records and file final tax/SEC reports​

4. Key Documents

●​ Board resolution for dissolution​

●​ Shareholder/membership approval​

●​ Articles of Dissolution​

●​ Affidavit of non-operation (if applicable)​

●​ SEC clearance and issuance of Certificate of Dissolution

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